Operation Management

Polyface: The Farm of Many Faces

Submitted By
Group # 9
Saurabh Shah
Soniya Lunawat
Madhu Lata Meena
Aditya NCV
Roshan Mohammed S
Devashish Tripathi
 Group # 9
Section C

Q.1 What are the three C’s of Polyface (Company, Customers, Competition)?
Company:
The Polyface is a family-owned farm which follows ecologically sustainable practices. The
farm owner, Joel Salatin, moved away from the conventional farming methods to more
natural model. Where other companies switched to a single type of production, they adopted
biodiverse production. This technique resulted in quality products with significantly 25%
fewer bacteria.

According to Salatin, his current resources and production capacity wouldn’t be able to fulfill
the growth in demand which has been observed recently. To increase the production without
compromising on the unique organic business model for scale is a real challenge in front of
him.

Customers:

There are three types of customers:

1. Buy directly from the farm: 25% of goods are sold to customers who come to the farm on
weekday mornings.

2. Buyers from Metropolitan Buying Club (MBC): 45% of products are sold and delivered to
the customers through Washington-area MBC.

3. Restaurants: Remaining 30% of the products are sold to approximately 50 restaurants,

small retail outlets and other food establishments in Staunton, Charlottesville, and
Harrisonburg, Virginia, and Washington, D.C.

Recently, large fast food chains like Chipotle have also started to buy from Polyface.

Competition:

Due to industrialization in food manufacturing, more firms shifted towards stereotypical

polyculture configuration. These firms increased their productivity by narrowing their scope
to single-product operations. These firms were competing against Polyface.

With the increased importance of convenience in buying, Supermarkets became a

competition to small-scale farming operations and local food markets.

Q.2 Where does Polyface fall in the product process matrix?

Polyface has many products like Beef, chicken, eggs, pork, rabbit, turkey. They follow different
processes for different products but have a significant dominant flow which starts with
cultivating grass and ends with shipping product across the same channels for all the products.
Hence, it falls at ‘Batch’ in the product process matrix.
Q.3 What makes Polyface different from the other cases that you have discussed in the
course until now?

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The Polyface farm is a differently operated farm; it takes advantage of natural environment
and economics of scope to sustain itself for a long time. The farm owner Joel Salatin utilizes
the natural biodiverse model rather than a conventional model. The farm applied the strategy
of differentiation to achieve a better quality of product fulfill the customer requirement and
same time economically delivered the value. Polyface is the case of sustainability while using
useful operational model. The industrial model focused on the specialization now a day, but
farm owner excelled in utilizing his resources even animals also. With the significant demand
in the market, he sticks to his natural biodiverse model. To maintain his business model
Polyface made the trade-off of business expansion. Polyface uses the multiple product output
model with interconnected and interdependent operation techniques. Polyface uses a
different style of the distribution network. Polyface sells the products to the only local
customer, the metropolitan buying club and local restaurants so that delivery or
transportation cost can be reduced.
Q.4 Draw the interdependencies among the Polyface’s production processes? What do you
think is the “bottleneck” in the overall process adopted at Polyface?
The interdependent process is shown in the following figure.

Polyface used the nutrient produced by the animals to feed the soil; the grass forming is the
backbone and bottleneck of the Polyface operation, which is interlinked between soil, plant,
and animals. They offered cattle and chickens to graze in a specific area by using an electric
fence. These things are depending on the growth and density of the grass. They decided the
optimum size for paddock in each heard. They initially offered cattle to graze when grass

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Section C

length is suitable for cows. After three days they allowed chickening to graze the area. They
used the chicken’s excrement which is nitrogen-rich to improve soil’s fertility.
Polyface reduced its waste disposal cost by processing its meat compared to the outsourcing
it to the certified slaughterhouse. Polyface also used institutional scratching motion of
chickens to mix cow and chicken dropping into the soil. Polyface leveraged turkeys to reduce
the labor cost in the vineyard.
Overall it can be said that interconnect functionality of the system is unique to build. This
system helped Polyface to use its infrastructure and resources effectively.
Q.5 Is Polyface exploiting economies of scale? If yes, then justify your answer. If no, then
what is Polyface trying to exploit. Explain your answer.
No, Polyface is not exploiting economies of scale, but it is possible to use economies of scale
too in development. Instead, Polyface used polyculture configuration community-oriented
farming to mimic biodiversity. Salatin’s approach followed his father’s beliefs of recognizing
natural animal inclination and taking advantage of their physiological distinctiveness.
How Polyface managed its operations to optimize are given below:
1. Managed a grazing system so that enough grass was produced enough to fatten two calves
to cows.
2. Used non-genetically engineered grains for chicken diet
3. Composted and used internal organs as fertilizers, thus reducing wastage. Excrement was
pumped into manure lagoons.
4. Used pigs instead of machinery to enable the composting process
5. Used cohabitation system for rabbits and chicken in winter
It is not only reduced cost but led to a much healthier growth of animals in Polyface.
There are challenges to them exploiting economies of scale like needing more land and more
experts for efficient management or needing a new distribution channel to manage the
expansion. Thus, they may find it difficult to increase the number of animals on the farm.
Q.6 What is economies of scope? Is Polyface achieving economies of scope? If yes, how?
Economies of scope are maximizing utilization of overheads and assets so that the overall cost
of production is minimized. Polyface is indeed exploiting economies of scope. Like mentioned
in the previous part, they have adopted multiple methods to utilize their operating system to
reduce cost efficiently. Other than the points mentioned above, some others include:
1. Using environmentally motivated methods to cut down on capital expenditure. E.g.,
Polyface spends $0.5 on infrastructure per $1 of annual sales.
2. Pastured eggs have 50% more folic acid, 70% more vitamin B12, 60% more vitamin A, 300%
more vitamin E, 700% more carotene with 30% less cholesterol and 25% less saturated fat
compared to factory made eggs.

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3. They used a rotation system for species including rabbits, vegetables, chicken, etc. to avoid
pathogens and diseases.
4. Grazing patterns were followed which supported more cows to graze compared to open
grazing. This also helped to retain the nutrient content in the soil.
5. Inedible parts of the cow were grounded to small animal feed to prevent wastage.
6. The hen was beaked to avoid cannibalization and to feather pecking.
7. Automatic egg collection devices used to collect eggs.
Q.7 How can you achieve economies of scope? Think qualitatively what all you should
know and use to achieve economies of scope.
Economies of scope are said to achieve when the aggregate total cost of the production of a
variety of goods is lesser than the costs of production of goods when produced separately.
This concept mainly focuses on the diversity and the range of the goods produced.
In case of Polyface, the economies of scope are already being exploited in some way as there
is a diversification in the products being produced such as the cows, pigs, turkeys, rabbits, and
chicken.
Some of the methods to achieve the economies of scope are-
1. Having a flexible and agile manufacturing process-This allows us in the quick adaptation to
the changes in the market with minimal switching costs and is useful to add up a variety to
the production lot being produced.
2. Economies of diversification can lead to the economies of scope-This is helpful in expanding
the existing capabilities, resources and the facilities required to achieve the required variety
of the production
3. Integrated supply chains-This is mainly done by the vertical integration of the existing
supply chains present in the operational activity. It would reduce the wastes, help improve
the cost-cutting process and helps in the gains in the productivity in the long term.
The main things which must be needed to achieve the economies of scope are-
1. The demand for the variety of goods to be produced. The firm needs to have a clear picture
of the individual requirements in the market so that the product mix can be planned
accordingly.
2. The compatibility in the production systems for various products being produced. It is
essential as the compatibility will enable the existing overheads present in the production
unit to make any changes required to become suitable to produce a variety of a lot of the
goods.
3. There should be a precise estimation of what resources, facilities, and capabilities different
products would need to be produced.

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Q.8 Do you think job shop exhibits economies of scope? Explain.

A job shop characterized by High Process Flexibility - process segments are loosely linked &
flow is jumbled and High Product Variety – Low Standardization, One of a kind & Low Volume.
Such highly customized products are demanded & produced to order, one at a time. Thus, job
shops are most suited to produce custom products in low volumes. If there is a flexible job
shop that produces only one product, it results in opportunity costs of not producing a wider
variety.
Economies of Scope is the added benefit because of making simultaneous manufacturing of
different products more cost-effective than manufacturing them on their own. It maximizes
shared usage of resources like raw material, machinery, & other production facilities for
maximum benefit through cost minimization leading to profit maximization. The long-term
Marginal cost is thus, reduced due to the increased production and same equipment or
resources can produce multiple products more cheaply bringing efficiencies by variety.
It may seem that economies of scope are challenging to achieve in the Job shop characterized
by high process flexibility & product variety while economies of scope aim to attain more by
having a range of products. In the modern era with the advent of technology, computer
controls, programmed production sequences, an electronic memory, it is possible to make
smaller production runs and shared investment/capacity to achieve economies of scope.
In the farming sector, owing to industrialization, the focus shifted to mechanization &
attaining economies of scale, however, that resulted in repeated crop cultivation, more usage
of land for same purpose leading to overutilization, declining fertility, and, overall decreasing
efficiency of operations for a farm. Economies of Scope, however, in the farm through
decentralized & smaller systems will make it possible to enhance yield regarding total
nutritious value per unit land acreage thus, making it more suitable, convenient & appealing
to customers.
Q.9 Spot a few differences between managing scale and managing scope.
Economies of scale and scope are managed differently on various parameters. In case of
economies of scale, the strategy followed is low-cost leadership whereas in economies of
scope the firm focus on differentiation of product. Scale management emphasizes increasing
the utilization of the process but while in economies of scope the capacity is kept flexible.
The purchasing and inventory stock is managed differently in both the conditions. In
economies of scope, the inventory is purchased bulk which reduces the purchasing cost. Also,
the inventory stock is kept at its minimum but in economies of scope comparatively high
inventory buffer is maintained so that easy switching between product lines is possible.
The risk associated with economies of scale is relatively high. In a scaled operation, due to the
more considerable distances between the center of problem and discovery, and the sheer
speed of operations, huge losses can pile up before you intervene. This risk can be controlled
in economies of scale at a faster rate. In economies of scale, the firm invests in expertise in
term of employees and technology. The firm hires specialist managers who oversee
and improve production systems can streamline processes and increase productivity.

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Section C

Q.10 What is the annual productivity of Polyface?

Productivity has been defined for each of the animals as a ratio of its output potential revenue
to its incurred cost, i.e.,
Productivity = Revenue per head / Cost per head
1. Beef

Parameters Polyface
cost of a Calf $450
Other Expenses (Feed, supplements, etc.) $50 (20+$10+$20)
Initial Weight 450 pounds
Weight gain per day 1.5 pounds
Time is taken for a Calf to grow into a Cow 10 Months
Final weight of a Cow 900 pounds (=450+1.5*30*10)
Revenue per pound $4.25
Infrastructure Cost (per $ of sales) $0.5
Meat content per Cow (45% of live weight) 405 pounds (=900*45%)
Total Cost (C) $500.5 (=$450+$50+$0.5)
Total Revenue per Cow (R) $1,721
Productivity (R/C) 3.44

2. Chicken

Parameters Polyface
Initial cost (Broiler chicks) $0.90/chicken
Other expenses (infra, mortality costs) $0.10/chicken
Meat content per chicken 4.25 pounds
Revenue per pound (Exhibit 9) $3.25
Time is taken for a Chicken to grow Nine weeks
The flow rate for the slaughtering process 50 chickens per hour
Cost $1/Chicken
Total Cost (C) 14,000 chickens $14,000
Total Revenue (R) $193,375 (=4.25*3.25*14000)
Productivity (R/C) 13.81

3. Eggs

Parameters Polyface
Eggs/Year 70,000 dozen
Hens 2,000
Eggs/Hen/Year 420
Price Per dozen large eggs $3.75 per dozen
Stewing chickens (post-egg laying period) 800

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Revenue per stewing chicken $2.75/pound

The weight of a stewing chicken 2.50 pound
Revenue from Chicken $5,500 (=800*2.75*2.5)
Revenue from Eggs $262,500 (=70000*3.75)
Revenue from Eggs per Hen (Productivity) $131.25 (=$262,500/2000)

4. Pork

Parameters Polyface
Weight of Pig 300 pounds
Weight of meat per pig (exhibit 2) 180 pounds
Price per pound of meat $3.75/ pound
# of Pigs (exhibit 2) 700
Revenue per head (R) $675 (=3.75*180)
Margin per head $100
Cost per head (C) $575
Productivity (R/C) 1.17

5. Rabbits

Parameters Polyface
Weight of meat per Rabbit 2.75 pounds
Price per pound of meat $6/ pound
# of Rabbits 1200
Revenue per head (R) $16.5 (=2.75*6)
Margin per head $10
Cost per head (C) $6.5
Productivity (R/C) 2.54

6. Turkey

Parameters Polyface
Weight of meat per Turkey 15 pounds
Price per pound of meat $3.25/pound
# of Turkey 1200
Revenue per head (R) $48.75 (=3.25*15)
Margin per head $20
Cost per head (C) $28.75
Productivity (R/C) 1.70

Q.11 Do you think Polyface can withstand competition in the beef market? Do you have
any suggestions to make here?

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Yes, Polyface can withstand the competition in the beef market as can be determined from
the productivity metrics given below. Productivity has been defined as the Saleable content
per acre of land used. Demand is much larger than supply in the case. Hence, productivity is
being calculated regarding Production per acreage. Supply Inputs regarding breeding time,
revenue and total expenses per cow are considered for deriving productivity.

Parameters (Given Data) Polyface Industry

Initial Weight 450 pounds 600 pounds
The initial cost of buying Calf $450 -
($1/pound)
Other Expenses $50= ($20-Mineral $255
(Feed, supplements etc.) Supplement+$10- ($1.70/day*5months*30
Hauling +$20-Prorated day/month)
Mortality)
Weight gain per day 1.5 pounds 3 pounds
Time taken for a Calf to grow into a 10 Months*30 5 months*30
Cow days/month =300 days days/month=150 days
Final weight of a Cow 900 pounds 1,050 pounds
(=450+1.5*300) (=600+3*150)
Revenue per pound $4.25 $3.51
(Exhibit 9 in the case)
Infrastructure Cost* $0.5 $4
(per $ of sales)
*Overall infrastructure cost is considered for unit economics calculation of Beef

Parameters (Derived) Polyface Industry

Meat content per Cow 405 pounds (=900*45%) 472.5 pounds (=1050*45%)
(45% of live weight)
Revenue per pound $4.25 $3.51
(Exhibit 9 in the case)
Total Cost (C) $500.5 (=$450+$50+$0.5) NA
Total Revenue per Cow (R) $1,721 $1,658
Productivity (R/C) 3.44 NA

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